Consumer Debt Studies Struggle to Paint Accurate Picture of Credit in America
According to a survey by Bank of America, nearly half of Millennials (age 23-37) have at least $15,000 in savings, and 16% have more than $100,000 stashed in a bank. These figures have almost doubled since Bank of America last conducted the survey in 2015.
Almost simultaneously as Marketwatch published these findings, Forbes highlighted a CreditCards.com report stating that two-thirds of Millennials were concerned they would never be able to pay off their debts. The Forbes article went on to interview a senior analyst at CreditCards.com named Matt Schulz.
When asked about the state of Millennial debt, Schulz immediately recommended that this burgeoning generation pay down credit card balances. He even went so far as to quote recent figures placing credit card debt in America well above $1 trillion.
But other data shows a very different landscape related to Millennial credit usage. In November, the Consumer Financial Protection Bureau (CFPB) released its biennial report on credit usage and trends. Although credit card usage and debt have risen to pre-recession levels in recent months, much of that uptick in swipes is due to more affulent, older credit card holders replacing cash and check transactions with cards.
In fact, another study last year found that only about one-third of millennials even hold a credit card, and many are hesitant to adopt them after watching close family and friends struggle through the mortgage crisis a decade ago. Credit cards are most common with baby boomers, college educated consumers, and those with an annual income over $75,000.
Further, 80% of 18 and 19 year olds in America are credit invisible, lacking the information necessary to establish a credit score. This research suggests the importance of alternative financial services, like the short term loan products offered by NAFSA members, to the underbanked, credit invisible Millennial workforce.
Isolated consumer debt studies and interviews rarely paint a complete picture of the hardships and difficult choices Millennials are forced to make as they enter the workforce and become productive members of American society. An accurate portrayal of the landscape facing young adults can only help credit providers and financial regulators make informed and sustainable choices for the future of the industry and the financial success of an entire generation.
